FOM expansions will fuel growth of CommunityAmerica CU

LENEXA, Kan. - On July 12, the leaders of CommunityAmerica CU cut a ribbon officially opening the credit union's new headquarters here in a suburb of Kansas City. The ceremony also symbolically ushered the institution into the ranks of the big leagues of credit unions- the billion dollar in asset club. The event capped a decade of growth from being one of a group of smaller, SEG credit unions into one of the largest financial institutions in metropolitan Kansas City with a dozen offices across two states. Membership stands at 113,000. The credit union, which has a Missouri charter, passed the billion-dollar asset mark in November 2000 and hasn't looked back. It now has assets of $1.1 billion. The growth is the result of a strategic plan begun in the late 1990s to reposition the credit union, which was built by serving groups with employees scattered across the nation and the world, into one with a strong regional base. CommunityAmerica's roots go back to the formation of TWA Club Credit Union for employees of Trans World Airlines in Kansas City in 1940. That credit union grew from a working capital of $1,069 and in 1992 became Members America CU. In 1998 Members America merged with Community America, which had begun in 1957 as Yellow Freight Employees Credit Union. At the time of the merger, Members America had 90,000 members and CommunityAmerica 18,000 members. The two served 400 SEGS and had six offices. It continues to operate Yellow Financial Credit Union as a division of CommunityAmerica. As NCUA implemented new limitations on SEG acquisitions in the late 1990s and the economy soured for the airline industry during the last half of the 1990s, president and CEO Dennis Pierce and his staff at Members America began to think about the future. "We knew we had to smooth out the ups and downs and find other market opportunities for us," he said. So we were really moving in a direction of becoming a community organization." The merger of Members America and CommunityAmerica joined two organizations that complemented each other well. Both were moving to becoming community-based credit unions, Members America on the Missouri side of the Kansas City metropolitan area and CommunityAmerica on the Kansas side. "We are the only credit union in the metropolitan area that crosses state lines and has active branches and membership opportunities on both sides," Pierce said. Since the merger, growth has continued. In 2000, CommunityAmerica merged with the failed, $50-million Sante Fe-Topeka CU in Topeka, Kan., which had a field of membership that encompassed the entire state of Kansas. Since, it has capitalized on the expanded FOM expansions allowed by the Missouri Credit Union Commission to add areas that include nearly 1.2 million people in the field of membership. In 2002, it was granted permission to add 500,000 residents in St. Charles County, Mo., and several other areas around St. Louis to its base. Then, earlier this year, it obtained approval to add 660,000 residents of Jackson County, Mo., which includes much of the Kansas City metropolitan area to its field of membership. "That's a good growth area for us and an area we continue to target going forward," Pierce said. Neither of those FOM expansions was challenged by the Missouri Bankers Association, which has appeals pending on more than a dozen multi-county FOM expansions in the state. (See related story page 30.) Since the credit union's field of membership already included the Kansas side of the metro area and Clay and Platte counties in Missouri to the north, the addition of Jackson County, the heart of the Missouri side of the area, made sense. Pierce said the county includes between 35% and 40% of the Kansas City metro area. "It's the last piece of the puzzle we didn't have," he said. It will also better spread the cost of media. So far, the credit union has used various media in the Kansas City metro area including radio and billboards, but not, yet, television. CommunityAmerica also expects to move aggressively in the northern part of the metro area, where population growth is most rapid. "That's a good growth area for us and an area we continue to target going forward," Pierce said. Though 80% to 90% of its member business is handled by telephone, CommunityAmerica decided that it could best expand the range of financial services for the targeted group of members it sought, as well as existing members, with brick-and-mortar offices. On completion of the merger, Pierce said, the credit union had six branches, so it set a goal of 10 new branches between 2000 and 2005. "We believe that brick and mortar still is important, it creates some legitimacy for the organization," Pierce said. CommunityAmerica currently has 13 offices with one in the Kansas City suburb of Overland Park, Kans., set to open in January 2003 and two more planned that may break ground in 2003. The credit union also is now planning for branches in Jackson County. The branches have a common design, which Pierce described as creating a "billboard effect," and include a public space for community use and for financial planning seminars. The branches, Pierce said, "have a lot of functions in our long-range plans." Among those functions are mortgage loan origination, trust services and financial planning. Branches, though, make sense only if they help assets and deposits grow and that issue is now on Pierce's mind. His target is to reach at least $1.5 billion in assets in five years. "We're building the cost base and the expense base that we need," said Pierce. "Asset growth in the long run is one of the ways you're able to justify and support that expense growth." Pierce is slightly behind his plan for asset growth. "The economy, obviously, had an impact on us over the last year," he said. "We're beginning to come out of that a little bit." He's also lagging in deposit growth, which, he says, is a quirk in the regional economy that has affected other financial institutions, but adds that he is still comfortable with the targets he has set. "We've had good progress, " he said. " But it's not exactly where we'd like to be completely." Among the strengths that he believes will allow the growth in assets to pick up speed are CACU's strong presence in the mortgage market - 50% of the loan portfolio is in first mortgages and home equity loans - and its indirect auto lending programs. "Our field of membership helps drive (the auto lending) because we can qualify almost anybody in the metro area," Pierce said. Membership growth is another goal Pierce has set his sights on. Growth there has been modest, "decent," was the term he used, but Pierce attributes that to a decision to eliminate inactive accounts. The credit union allows shareholder accounts of as little as $1. Pierce joined what is now CommunityAmerica in January 1993, after 12 years with United Consumers FCU of Kansas City and a career in banking before that. Members America had a limited product line at the time - it didn't offer checking accounts and had a loan-to-share ration of less than 40%. In addition, TWA was going through its first bankruptcy and, Pierce said, the credit union got caught in the backlash against the airline. The credit union had changed its name and dropped the "TWA" in 1992. Pierce brought with him an emphasis on long-range planning and a strategy to be more aggressive "so the organization became less reactive and more proactive in our approach." Now in a new arena, as one of the Kansas City area's 10 largest financial institutions, with a broad field of membership, the challenges are likely to grow. "We've got to figure out a way to look different in that clutter and finds ways to be attractive to people," Pierce said. Has CommunityAmerica become too big for credit union britches? Pierce admits that becoming a mutual has crossed his mind, but, he said, "It's not something we're interested in today. Being a credit union is still the best place for us to be." But he added, "Part of what you have to learn is never say `no' to an opportunity." -